Rules for non-residential structures and buildings allowance amended

HMRC has amended the compliance rules for a new capital allowance for non-residential structures and buildings (SBA) following consultation

Under the scheme, businesses that invest in new builds or renovations on or after 29 October 2018 will be able to claim tax relief at 2% a year on eligible costs. The legislation will be passed under statutory instrument and claims can be backdated.

As a result of the consultation process, some features have been amended, including those relating to short-term leaseholds, eligible pre-trading costs, periods of disuse, and reducing claimants’ administrative burdens.

The SBA is claimable where the building is designed to generate ongoing commercial activity, rather than for buildings designed for residential use.

HMRC has confirmed that the relief for capital expenditure incurred by the lessee so that any capital costs for the remainder of the 50-year period under the SBA will now be available to the lessee as a cost for capital gains tax purposes.

The final proposals also clarify that a structure or building will retain its SBA eligibility throughout a temporary period of disuse, provided it is not used for a residential purpose.

Land and dwellings will not be eligible for relief. Where there is mixed use, for example between commercial and residential units in a building, relief will be allowed on the amount apportioned to a non-residential use on a just and reasonable basis. There is no relief for the cost of work spaces within domestic settings, such as home offices.

Legislation is being laid before parliament to provide for this new capital allowance and is expected to come into force in line with its commencement provisions.

Guidance will be published on HMRC's website to accompany the legislation and to provide claimants with further explanations of what constitutes qualifying expenditure, an explanation of definitions used in the legislation (such as the definition of a dwelling-house and mixed use buildings), and new flexible rules regarding cases where expenditure incurred after a building comes into use can be claimed.

The measure was first announced at Budget 2018.

HMRC policy paper, Capital Allowances, Structures and Buildings Allowance (SBA)

Sara White

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